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UK: Private Enterprise - Xenova's Fungi Forays.

UK: Private Enterprise - Xenova's Fungi Forays. - Neil Porter may well go down in medical history as the man who discovered a drug which stops heart, lung and liver transplants being rejected - under a prickly pear cactus in the Canary Islands.

Neil Porter may well go down in medical history as the man who discovered a drug which stops heart, lung and liver transplants being rejected - under a prickly pear cactus in the Canary Islands.

Porter had postponed a summer holiday after being hired to help set up Xenova, a company dedicated to scouring the Earth's smallest cracks and crevices for new medicines. Erecting lab benches and hiring staff prevented him and his wife, Tricia, from getting away until November. "We are driving around Lanzarote in a jeep," says Porter. "It has this fantastic lava-formed moonscape, used in one of the James Bond films. And I was collecting samples from rhizosphere, the roots area beneath cacti."

Like Bond, microbiologists are specially-licensed, so that Porter and his suspicious-looking substances can be waved through customs at Heathrow. Eighteen months after collecting his soil sample, Porter received a call from laboratory staff Glenda Chandler and Stephen Wrigley: "One of the green sporing fungi you brought back from Lanzarote has just matched with immune suppression."

Porter - who says, 'I left Glaxo because it was a "big company" and Xenova offered a chance to make a mark' - had made his, and Xenova's first, mark. In the three years since then the company has come up with, not just one, but four possible treatments for some of the world's most feared and drug-resistant diseases. Star among them is a potential cancer cure.

The little-known concern - described by founder Dr Louis Nisbet as the "first post-biotechnology company" - is more than promising well. Institutional investors must be wondering whether they might have bought a stake in another Glaxo.

Porter's find is, in a few years time, likely to attack the market for immunosuppression drugs, currently led by Sandoz's Cyclosporin, sales of which have been rising at 25% a year to reach $420 million last year. "There is vast growth potential", says Porter, "for drugs which can be used in a wider range of immunological diseases, including rheumatoid arthritis and diabetes."

But that is dwarfed by other prospects. "The cancer market will be valued at $5 billion worldwide this year," says Nisbet, "and is expected to grow to $13 billion by the year 2000 as new therapies reach the market. The US alone spends more than $1.5 billion a year, and about $200 million is invested annually by UK research councils and cancer charities.

"This scourge strikes six million people a year, and there is an immense need for drugs which are more effective and less toxic" - exactly the kind of drug which Nisbet believes he can bring to market, to treat solid tumours in the colon, breast and lung. And, like Porter's discovery, the possible cancer drug was first found in a remote and exotic location. "It came from a South-East Asian aquatic hyphomycete fungus," he says. "Precisely where will remain one of the best-kept commercial secrets."

Nisbet, 44, is recognised worldwide as an expert on microbes, the planet's smallest inhabitants. He is convinced that cures can be found in rocks, soil, vegetation and even on animals, bacteria and fungi.

"We're searching for drugs from bugs," Nisbet told investors who provided start-up funds five years ago. "Microbes exist by the million and contain a very rich supply of very different chemicals. Many come from unexplored ecological niches."

As in all pharmaceutical R and D, there is a big IF. Nisbet emphasises the dangers: "We have unique molecules which are tackling the mechanics of diseases that have not been solved before. We are dealing in breakthrough areas of medicine. By their very nature, you don't know whether these things are going to work. What we do know is that, if we can take them all the way down the track, we are dealing with products with potential market values of hundreds of millions a year. And, just possibly, a billion-dollar blockbuster." Nisbet set up a small laboratory on Berkshire's Slough Trading Estate in 1987. Near-neighbours include leading edge biotechnology companies such as Celltech.

Classically, biotech scientists go looking for new medicines by isolating proteins - compounds which contain carbon, hydrogen, oxygen, nitrogen, frequently sulphur and occasionally phosphorus, the main building blocks of human tissues and organs. They identify proteins that carry out important functions, and then try to clone them as drugs. Xenova - combining the Greek word xenos and the Latin nova "meaning strange, new, novel", says Nisbet - works in an entirely different way. It comes up instead with natural molecules which mimic the body's own regultors.

"Since man first picked berries off the forest floor, we've known that fungi have been a prolific source of medically active compounds," says Nisbet. "Penicillin, the best-known drug of all time, was developed from fungus. By recognising that the organs in our bodies came from very much smaller, simpler organisms, we're backing evolution. Fungi, for example, regulate their mating via hormones analogous with our own." All work is targeted at "the big diseases", for which there are few drugs that work extremely well. Nisbet's target of 30 diseases has resulted, so far, in only one definite miss.

The cardiovascular drugs market is worth $19 billion a year, but none give what Xenova describes as "more selective therapeutic options". Xenova believes it may have more than one. Many thrombosis sufferers produce too much plasminogen activator inhibitor (PAI), which is in turn used to control the tissue plasminogen activator (TPA), removing small blood clots as they form. If PAI is excessive, clots can build up. A micro-organism stored in Xenova's cryogenic bug-bank has produced a molecule that restrains PAI, allowing TPA to work naturally.

Smallness makes a vast difference. "If you think of a protein as being the size of an average room," says Nisbet, "then our molecules are the size of a football. And being so small, they can reach parts or of the body that proteins cannot reach."

Around 15% of the West's population suffers from arthritis, and there aren't drugs available that are well tolerated by their bodies, or which appreciably reverse or inhibit the disease. Some progress has already been made in osteo-arthritis to reduce the pain and swelling of the joints, creating a $5-billion drugs market in 1990. "But the most pressing need", says Nisbet, "is for drugs which will halt the relentless progression of joint damage in the more severely affected patients. They are as many as one in 100 of the population. This would reduce the number of people progressing to a crippling disability."

A whispered hope that an Aids treatment may one day be available, too, soon produces an outcry for its early release - which is why Nisbet refuses to make much of the advance that Xenova has made in the field of viral infection. "We're following a number of leads," he says. "They are directed at known events in HIV viral infectivity and replication, which may provide an early route to identifying small molecules which can inhibit these processes. But, frankly, it's too early to judge anything."

Its approach to cancer, where the biggest potential lies, is entirely novel. Nisbet says existing drugs aim to kill cells, and do it non-selectively. "We are trying to stop the processes which drive the growth of cancer cells. And if you stop that growth, your body's own defence system then takes over." Its inhibitor controls the rapid proliferation of cells. "We are beginning to understand the basic mechanisms which cause tumours to grow," says Nisbet; "firstly, the factors which switch on cells and make them divide to form a tumour.

"These growth factors are proteins that react with another protein on the cell surface. They connect precisely, like a key in a lock. They transmit a signal into the cell which causes genes to be actuated, which leads to the formation of a tumour. You cannot design a drug to combat that. Your body would reject a synthesised protein. We need to make a simple molecule which the body's immune system does not recognise - which can block the entry of the growth factor 'key' into the lock." And it's on that which they are now working. Nisbet's fan-club grows apace. Xenova recruiters on university milk rounds have no trouble pulling the brightest crowds. Of its 100 staff, 85 are scientists. More than half hold PhDs. The world's leading institutions have shown themselves ready to back his beliefs. Among the most recent to inject cash - in a third round of financing which raised £7 million, to boost total outside investment in Xenova to £12.2 million - are Standard Life, Norwich Union and Jafco, Nomura's venture capital division.

Investors had wavered at first. Nisbet's initial attempt to raise finance collapsed just three days before Christmas. Xenova might never have existed had he not put in place a new package before Black Monday, the following October. "But, actually, Nisbet has found it surprisingly easy to persuade non-specialist investors of his worth," says Charles Sherwood, one of the few City financiers who have a specialist knowledge of life sciences.

"Okay, a Xenova product might well be a truly breakthrough discovery. But any product coming out of its laboratories, will not achieve its first sales until 1997 and beyond. That is one hell of a long time for any company to invest. Nisbet is saying, 'We want some cash, but our first product sales, let alone profits, won't be for at least 10 years'". Nisbet won backers, Sherwood says, because of his extraordinary ability to talk science to the layinvestor, without being patronising. "He translates a biotech business with negative cashflow into pounds, dollars and yen - and market opportunity."

Young scientists, find him charismatic. But his business-sense, Sherwood says, is underpinned by "Scottish commercial nous". Xenova didn't have to be an integrated pharmaceutical company to be successful. It was going after markets that were unserved at present an big. If Xenova broke through in one of these markets, it could become huge. "There are very few Apple-type companies around. Xenova has a chance to be one."

Five years ago, Nisbet was coasting on a corporate wave as director of antibiotic discovery and biotechnology with the US company, Smith Kline and French, (before its merger with Beecham). He had successfully seen through one piece of microbial research there. But he could see that SK and F did not share the zeal about the medicinal properties of fungi which had possessed him since doing his PhD at Imperial College. He resigned, came back to London, recognised his own limitations by hiring a commercial director and then looked for backers. Even now, he's on half-pay. "You don't do this for money," says Nisbet. "You only do it if you have a superior technological edge that will deliver valuable products."

Porter, who was in Nisbet's team at Glaxo in the late 1970s, is now Xenova's head of applied microbiology, or "chief fungi-finder". He taps scientists located everywhere from the arctic wastes to the savannah. Thailand is so fungi-rich that Xenova employs Dr Nigel Hywell Jones to scour the Khao Yai national park for new species. "Every plant is thought to have different microbes associated with it," says Nisbet. "There must be a million-and-a-half different species of microbes worldwide. We just assume each contains at least one bioactive chemical."

Xenova's annual staff outing involves taking families three miles to Burnham Beeches for a "fungal foray". Last November's produced more than 100 species, including one fungus not seen in Britain for 66 years. But Porter also happily sends teams to the South American rain forests, back to the roots of medicines, among the herbal remedies known to tribal doctors for centuries.

Graham Kinsey is a 27-year-old mycologist who specialises in ascomycetes fungi. He embarked on such a voyage of discovery last November, the last stage of which required a three-day trip by dug-out canoe into the Amazon basin. Operating from a hut in the Ecuadorean village of Cuyabeno, Kinsey spent two weeks searching for new species of ascomycetes. "It's actually rather small and inconspicuous group of fungi," he explains. "Most are under a quarter of an inch high and quite dull to look at, often just little black dots on rotting logs." With him was Xenova's senior mycologist and regular Amazonian-hunter Frances Fox, and John Hedger, senior lecturer in microbiology at the University of Wales, visiting professor at the local Quito University and Xenova consultant. They worked from a jungle hut-cum-lab, encouraging Indians to bring in fungi.

Hunting for microbes costs £400,000 a year - a pittance compared to the potential value of the 21,000 that have been isolated and examined in almost two million tests. The six chest-freezers in which they are stored may well be the world's largest living micro-organism bank. In Slough, fungi are grown on to the point where they generate chemicals. Xenova aims to isolate the microbial metabolites - the chemicals which control the body's metabolism. Its scientists have also set up an assay of diseases themselves. It then screens the microbes it isolates against all of the microbial chemicals they have produced. It's when just one microbe is found to work in the disease assay - a one in 10,000 chance, if they're lucky - that Xenova's young scientists start to get excited.

Nisbet's talent for people-speak comes to the fore when explaining the "drug-template" which they then create. "That's the thing", he says, "on which you can play molecular roulette - and create the families of molecules which can inhibit the way in which a particular tumour grows, which may inhibit acid production in the stomach or moderate Alzheimer's disease."[.QQ] Xenova, Nisbet knows, is too small to take potential drugs through the hyper-expense of full testing. To convince the likes of the US Food and Drug Administration that your treatments are safe is 20 to 50 times costlier than the initial research in the whole drug discovery-to-marketing programme. That will mean taking big-name drug companies on as partners, probably in a year's time. "I'm already getting calls from them and I believe that we could hold on to a third of the marketing rights." What would that make Xenova worth. "What is a third of Zantac worth," he asks.

Nisbet's work for Glaxo had nothing to do with Zantac, the anti-ulcer drug which propelled the company into the global business league. Now he finds himself with just two rivals in the search for drugs from natural organisms - in the shape of Merck Sharp and Dome and Glaxo itself. Several drugs manufacturers believe his pioneering approach could be key to a 21st-century generation of drugs. Four have paid Xenova to do work for them. Du Pont was first, in July 1988, but the purpose of its collaboration deal with Xenova, remains secret.

Hoffman-La-Roche contacted Xenova to help it find a chemical to prevent the rejection of transplanted organs (which Porter's find may have answered). Akzo was next, and then Xenova swerved into agrochemicals, via projects for Monsanto and FMC. "We have uncovered new pharmacophores which seem to immobilise pests," says Nisbet, who saw Xenova's income from contracts double last year to £1.4 million, while its own research costs increased pre-tax losses to almost £2 million.

The biggest cash injection compliment came from a Californian company whose name is synonymous with biotechnology-breakthroughs: Genentech, a superstar, a quoted pharmaceutical corporation worth $2 billion. "They have the technology for targeting certain diseases, with one of the best cardiovascular teams in the world," says Nisbet. "We have one of the best microbial teams."

They started working together in May 989. Ten months ago, Genentech committed itself to a five-year investment - expanding their joint research programme to include receptors important in hypertension, congestive heart disease and molecular mechanisms critical in atherosclerosis.

"They cover our costs in discovering drugs," says Nisbet. "Yet we share marketing rights outside North America." Genentech's $20-million investment (half as an equity stake in Xenova) is like Apple asking an infant British software house to help develop it a new computer. Ask Genentech chief executive Kirk Raab why he did it and he replies: "There was no one else."